The following discussion and analysis of our financial condition and results of
operations for the year ended December 31, 2021 should be read in conjunction
with the Financial Statements and corresponding notes included in this annual
Report on Form 10-K. Our discussion includes forward-looking statements based
upon current expectations that involve risks and uncertainties, such as our
plans, objectives, expectations, and intentions. Actual results and the timing
of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors and Special Note Regarding Forward-Looking
Statements in this report. We use words such as "anticipate," "estimate,"
"plan," "project," "continuing," "ongoing," "expect," "believe," "intend,"
"may," "will," "should," "could," "target", "forecast" and similar expressions
to identify forward-looking statements.



Overview



Our Business


We are a branded fashion apparel retailer and global apparel supply chain solutions provider based in China. We are listed on the NASDAQ Global Market under the symbol “EVK”.



We classify our businesses into two segments: Wholesale and Retail. Our
wholesale business consists of wholesale-channel sales made principally to
domestically and international recognized brands, and department stores located
throughout Europe, the U.S., Japan and the People's Republic of China ("PRC").
We focus on well-known, middle-to-high end casual wear, sportswear, and
outerwear brands. Our retail business consists of retail-channel sales directly
to consumers through retail stores located throughout the PRC as well as sales
via online stores at Tmall, Dangdang mall, JD.com, VIP.com etc.



Although we have our own manufacturing facilities, we currently outsource most
of the manufacturing to our long-term contractors as part of our overall
business strategy. We believe outsourcing allows us to maximize our production
capacity and maintain flexibility while reducing capital expenditures and the
costs of keeping skilled workers on production lines during slow seasons. We
oversee our long-term contractors with our advanced management solutions and
inspect products manufactured by them to ensure that they meet our high-quality
control standards and timely delivery requirement.



                                       29





Wholesale Business



We conduct our original design manufacturing ("ODM") operations through seven
wholly owned subsidiaries which are located in the Nanjing Jiangning Economic
and Technological Development Zone and Shang Fang Town in the Jiangning District
in Nanjing, Jiangsu province, China, Chuzhou, Anhui province, China and Samoa:
Ever-Glory International Group Apparel Inc. ("Ever-Glory Apparel"), Goldenway
Nanjing Garments Company Limited ("Goldenway"), Nanjing New-Tailun Garments
Company Limited ("New Tailun"), Nanjing Catch-Luck Garments Co., Ltd.
("Catch-Luck"), Nanjing Rui Lian Technology Company Limited ("Nanjing Rui
Lian"), Haian Tai Xin Garments Trading Company Limited ("Haian Tai Xin"),
Chuzhou Huirui Garments Co., Ltd. ("Huirui), Ever-Glory Supply Chain Service
Co., Limited ("Ever-Glory Supply Chain") and Ever-Glory International Group
(HK)
Ltd. ("Ever-Glory HK").



Retail Business


We conduct our retail operations through Shanghai LA GO GO Fashion Company
Limited ("LA GO GO"), Jiangsu LA GO GO Fashion Company Limited ("Jiangsu LA GO
GO"), Tianjin LA GO GO Fashion Company Limited ("Tianjin LA GO GO"), Shanghai Ya
Lan Fashion Company Limited ("Ya Lan"), Shanghai Yiduo Fashion Company Limited
("Shanghai Yiduo"), Nanjing Tai Xin Garments Trading Company Limited ("Tai
Xin"), and Xizang He Meida Trading Company Limited ("He Meida").



Business Objectives



Wholesale Business


We believe the enduring strength of our wholesale business is mainly due to our
consistent emphasis on innovative and distinctive product designs that stand for
exceptional styling and quality. We maintain long-term, satisfactory
relationships with a portfolio of well-known and mid-class global brands.



The main business objective of our wholesale segment is to expand our portfolio to premium brands, expand our customer base and improve our profits. We believe our growth opportunities and continued investment initiatives include:


  ? Expanding our global sourcing network;

  ? Expanding our overseas low-cost manufacturing base (outside of mainland
    China);

? Focus on high value-added products and pursue our production strategy

    mid-to-high end apparel;

  ? Continuing to emphasize product design and technology utilization;

  ? Seeking strategic acquisitions of international distributors that could
    enhance global sales and our distribution network; and

? Maintain a steady increase in market revenue while focusing on

    higher margin wholesale markets such as mainland China.




Retail Business



The business objectives for our retail segment are to establish leading brands
of women's apparel and to build a nationwide retail network in China. As of
December 31, 2021, we had 880 stores (including store-in-stores), including 109
stores were opened and 165 stores were closed in 2021. We expect to open
additional 100 to 150 stores in 2022.



We believe our growth opportunities and continued investment initiatives include:


  ? Building our retail brand to be recognized as a major player in the
    mid-to-high end women's apparel market in China;

  ? Expanding our retail network throughout China;

? Improve the efficiency of our retail stores and increase same-store sales;




                                       30




? Continue to launch flagship stores in Tier 1 cities and increase

    our penetration and coverage in Tier-2 and Tier-3 cities; and

  ? Becoming a multi-brand operator.




Seasonality of Business



Our business is affected by seasonal trends, with higher levels of wholesale
sales in our third and fourth quarters and higher retail sales in our first and
fourth quarters. These trends primarily result from the timing of seasonal
wholesale shipments and holiday periods in the retail segment.



Collection Policy



Wholesale business


For our new customers, we generally require orders placed to be supported by letters of credit. For our long-time and established customers with good payment history, we generally provide payment terms between 30 and 180 days after delivery of finished goods.


Retail business



For store-in-store shops, we generally receive payments from the stores between
60 to 90 days following the date of the register receipt. For our own flagship
stores, we receive payments on the same day of the register receipt. For sales
from e-commerce platforms such as Tmall, Dangdang mall, JD.com, VIP.com and
etc., we generally receive payments between 5 to 15 days following the date
of
the register receipt.



Global Economic Uncertainty



Our business is dependent on consumer demand for our products. We believe that
the significant uncertainty in the global economy and the slowdown of economies
in the United States and Europe have increased our clients' sensitivity to the
cost of our products. We have experienced continued pricing pressure. If the
global economic environment continues to be weak, these worsening economic
conditions could have a negative impact on our sales growth and operating
margins in our wholesale segment in 2022.



In addition, economic conditions in the United States and other foreign markets
in which we operate could substantially affect our sales profitability, cash
position and collection of accounts receivable. Global credit and capital
markets have experienced unprecedented volatility and disruption. Business
credit and liquidity have tightened in much of the world. Some of our suppliers
and customers may face credit issues and could experience cash flow problems and
other financial hardships. These factors currently have not had an impact on the
timeliness of receivable collections from our customers. We cannot predict at
this time how this situation will develop and whether accounts receivable may
need to be allowed for or written off in the coming quarters.



Despite the various risks and uncertainties associated with the current global
economy, we believe our core strengths will continue to allow us to execute our
strategy for long-term sustainable growth in revenue, net income and operating
cash flow.


Summary of Critical Accounting Policies



We have identified critical accounting policies that, as a result of judgments,
uncertainties, uniqueness and complexities of the underlying accounting
standards and operation involved could result in material changes to our
financial position or results of operations under different conditions or using
different assumptions.



                                       31





Revenue Recognition



We recognize wholesale revenue from product sales, net of value-added taxes,
upon delivery for local sales and upon shipment of the products for export
sales, at such time title passes to the customer. We recognize wholesale revenue
from manufacturing fees charged to buyers for the assembly of garments from
materials provided by the buyers upon completion of the manufacturing process
and shipment of the products for export sales. Retail sales are recorded net of
promotional discounts, rebates, and return allowances. Retail store sales are
recognized at the time of the register receipt. Retail online sales are
recognized when products are shipped and customers receive the products because
we retain a portion of the risk of loss on these sales during transit.



Our revenue recognition policy is in compliance with ASC 606, Revenue from
Contracts with Customers that revenue is recognized when a customer obtains
control of promised goods and is recognized in an amount that reflects the
consideration that we expect to receive in exchange for those goods. In
addition, the standard requires disclosure of the nature, amount, timing, and
uncertainty of revenue and cash flows arising from contracts with customers. The
amount of revenue that is recorded reflects the consideration that we expect to
receive in exchange for those goods. We apply the following five-step model in
order to determine this amount:



  (i)   identification of the promised goods and services in the contract;

(ii) determine whether the promised goods and services are performances

obligations, including whether they are distinct in the context of the

Contract;

(iii) the measurement of the transaction price, including the constraint on the variable

        consideration;

  (iv)  allocation of the transaction price to the performance obligations; and

(v) recognition of income when (or as) the Company meets each performance

        obligation.



We only apply the five-step model to contracts when it is probable that we will
collect the consideration it is entitled to in exchange for the goods or
services it transfers to the customer. Once a contract is determined to be
within the scope of ASC 606 at contract inception, we review the contract to
determine which performance obligations we must deliver and which of these
performance obligations are distinct. We recognize as revenues the amount of the
transaction price that is allocated to the respective performance obligation
when the performance obligation is satisfied or as it is satisfied. Generally,
our performance obligations are transferred to customers at a point in time,
typically upon delivery for local sales and upon shipment of the products for
export sale.


For all reporting periods, we have not disclosed the value of unsatisfied performance obligations for all product revenue contracts with an initial expected term of one year or less, which is an optional exemption permitted by the rules adopted.


Estimates and Assumptions



In preparing our consolidated financial statements, we use estimates and
assumptions that affect the reported amounts and disclosures. Our estimates are
often based on complex judgments, probabilities and assumptions that we believe
to be reasonable, but that are inherently uncertain and unpredictable. We are
also subject to other risks and uncertainties that may cause actual results to
differ from estimated amounts. Significant estimates in 2021 and 2020 include
the assumptions used to value tax liabilities, derivative financial instruments,
the estimates of the allowance for deferred tax assets, and the accounts
receivable allowance, and impairment of long-lived assets and inventory
write-offs.



Recently issued accounting pronouncements



In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"; In
November 2019, the FASB issued ASU No. 2019-10 "Financial Instruments-Credit
Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):
Effective Dates"; In March 2020, the FASB issued ASU No. 2020-03 "Codification
Improvements to Financial Instruments"; which modifies the measurement of
expected credit losses of certain financial instruments. This ASU is effective
for fiscal years and interim periods within those years beginning after December
15, 2022. The Company is currently assessing the impact of this ASU on its
consolidated financial statements.



                                       32




The Company is reviewing the new accounting standards as issued. Management has not identified any other new standards that it believes will have a material impact on the Company’s consolidated financial statements.


Results of Operations



The following table summarizes our results of operations for the years ended
December 31, 2021 and 2020. The table and the discussion below should be read in
conjunction with the consolidated financial statements and the notes thereto
appearing elsewhere in this report.



                                               Year Ended December 31,
                                       2021                                 2020
                               (in thousands of U.S. Dollars, except for percentages)
Sales                    $       330,978             100.0 %     $       267,354       100.0 %
Gross Profit                     100,952              30.5                91,213        34.1
Operating Expense                101,490              30.7                87,070        32.6
Income From Operations              (538 )            (0.2 )               4,143         1.5
Other Income                       3,391               1.0                 1,599         0.6
Income tax expense                 2,945               0.9                 2,469         0.9
Net Income               $           (92 )             0.0 %     $         3,273         1.2 %




Revenue


The following table provides a breakdown of our total sales, by region, for the years ended December 31, 2021 and 2020.


                                                                                                                     Growth
                                                                                                                   (Decrease)
                                        2021                                    2020                                in 2021
                                    (In thousands           % of            (In thousands           % of            compared
Wholesale business                of U.S. dollars)       total sales      of U.S. dollars)       total sales       with 2020
Mainland China                    $          71,325              21.6 %   $          29,055              10.8 %          145.5 %
Hong Kong China                              24,986               7.5                19,873               7.4             25.7
United Kingdom                                7,428               2.2                 8,753               3.3            (15.1 )
Europe-Other                                 23,418               7.1                19,950               7.5             17.4
Japan                                        17,075               5.2                11,406               4.3             49.7
United States                                40,668              12.3                28,172              10.5             44.4
Total Wholesale business                    184,900              55.9               117,209              43.8             57.8
Retail business                             146,078              44.1               150,145              56.2             (2.7 )
Total sales                       $         330,978             100.0 %   $         267,354             100.0 %           23.8 %



Total sales for the year ended December 31, 2021 have been $331.0 millionan increase of 23.8% compared to the year ended December 31, 2020. This increase is mainly attributable to a 57.8% increase in sales from our wholesale activities and a 2.7% decrease in sales from our retail activities.



Sales generated from our wholesale business contributed 55.9% or $184.9 million
of our total sales for the year ended December 31, 2021, an increase of 57.8%
compared with $117.2 million in the year ended December 31, 2020. This increase
was primarily attributable to increased sales in Mainland China, Hong Kong
China, Europe-Other, Japan and United States.



                                       33





Sales generated from our retail business contributed 44.3% or $146.1 million of
our total sales for the year ended December 31, 2021 a decrease of 2.7% compared
with $150.1 million in the year ended December 31, 2020. This decrease was
primarily due to a decrease in same store sales.



Total retail store area and sales per square foot for the years ended
December 31, 2021 and 2020 are as follows:


                                                     2021           2020
Total store square footage                           985,946       1,001,992
Number of stores                                         880             936
Average store size, square foot                        1,120           

1,071

Total store sales (thousands of WE dollars) $146,078 $150,145
Sales per square foot

                              $     148     $       150



Comparable store sales and newly opened store sales for the years ended the 31st of December2021 and 2020 are as follows:


                                                2021                  2020
                                              (In thousands of U.S. dollars)
Sales from stores opened for a full year   $       121,197       $       120,181
Sales from newly opened store sales        $         5,611       $         7,763
Sales from e-commerce platform             $        13,593       $        15,348
Other*                                     $         5,677       $         6,853
Total                                      $       146,078       $       150,145



* Primarily sales from stores that were closed during the current reporting period.




We remodeled or relocated 137 stores in 2021, and plan to relocate or remodel an
aggregate of 50 to 100 stores in 2022. Remodels and relocations typically drive
incremental same-store sales growth. A relocation typically results in an
improved, more visible and accessible location, and usually includes increased
square footage. We believe we will continue to have opportunities for additional
remodels and relocations beyond 2021. Same-store sales are calculated based upon
stores that were open at least 12 full fiscal months in each reporting period
and remain open at the end of each reporting period.



Costs and Expenses


Cost of sales and gross margin



Cost of goods sold includes the direct raw material cost, direct labor cost, and
manufacturing overhead including depreciation of production equipment and rent,
consistent with the revenue earned. Cost of goods sold excludes warehousing
costs, which historically have not been significant.



The following table sets forth the components of our cost of sales and gross
profit both in amounts and as a percentage of total sales for the years ended
December 31, 2021and 2020.



                                                                                                                  Growth
                                                                                                               (Decrease) in
                                                                                                                   2021
                                                           Year ended December 31,                               Compared
                                                  2021                                  2020                     with 2020
                                           (In thousands of U.S. dollars, except for percentages)
Net Sales for Wholesale Sales       $       184,900             100.0 %    
$       117,209         100.0 %              57.8 %
Raw Materials                                84,597              45.8                48,554          41.4                74.2
Labor                                         1,535               0.8                 1,268           1.1                21.1
Outsourced Production Costs                  60,879              32.9                37,027          31.6                64.4
Other and Overhead                              607               0.3                   620           0.5                (2.2 )
Total Cost of Sales for Wholesale           147,618              79.8                87,470          74.6                68.8
Gross Profit for Wholesale                   37,282              20.2      
         29,740          25.4                25.4
Net Sales for Retail                        146,078             100.0               150,145         100.0                (2.7 )
Production Costs                             53,153              36.4                58,688          39.1                (9.4 )
Rent                                         29,255              20.0                29,984          20.0                (2.4 )
Total Cost of Sales for Retail               82,408              56.4                88,672          59.1                (7.1 )
Gross Profit for Retail                      63,670              43.6      
         61,473          40.9                 3.6
Total Cost of Sales                         230,026              69.5               176,141          65.9                30.6
Gross Profit                        $       100,952              30.5 %     $        91,213          34.1 %              10.7 %




                                       34





Raw material costs for our wholesale business were 45.8% of our total wholesale
business sales in 2021, compared with 41.4% in 2020. The increase was mainly due
to higher raw material purchase prices.



Labor costs in our wholesale business represented 0.8% of our total wholesale sales in 2021, compared to 1.1% of our total wholesale sales in 2020.

Outsourced production costs for our wholesale business accounted for 32.9% of our total wholesale sales in 2021, compared to 31.6% in 2020. This percentage increase was mainly due to higher labor costs outsourced.

General and other expenses for our wholesale business represented 0.3% of our total wholesale sales in 2021, compared to 0.5% of our total wholesale sales in 2020.



Gross profit for our wholesale business in 2021 was $37.3 million, an increase
of 25.4% from 2020. As a percentage of total wholesale business sales, gross
profit was 20.2% of our total wholesale business sales in 2021, compared with
25.4% in 2020. The decrease was mainly due to an increase in wholesale raw
material prices and outsourced production costs.



Production costs for our retail business for the year ended December 31, 2021
were $53.2 million compared with $58.7 million for the year ended December 31,
2020. As a percentage of our total retail sales, production costs were 36.4% of
our total retail sales for the year ended December 31, 2021 compared with 39.1%
for the year ended December 31, 2020. The decrease in amount was due to decrease
in sales.



Rent costs for our retail business for the year ended December 31, 2021 were
$29.3 million compared with $30.0 million for the year ended December 31, 2020.
As a percentage of total retail sales, rent costs were 20.0% of our total retail
sales for the year ended December 31, 2021 compared with 20.0% for the year
ended December 31, 2020. There were no significant changes.



Gross profit for our retail business for the year ended December 31, 2021 was
$63.7 million compared with $61.5 million for the year ended December 31, 2020.
Gross margin for our retail business for the year ended December 31, 2021 was
43.6% compared with 40.9% for the year ended December 31, 2020.



Total cost of sales for the year ended December 31, 2021 was $230.0million, a
30.6% increase compared with the year ended December 31, 2020. As a percentage
of total sales, total costs were 69.5% of total sales for the year ended
December 31, 2021, compared with 65.9% for the year ended December 31, 2020.
Total gross margin for the year ended December 31, 2021 was 30.5% compared with
34.1% for the year ended December 31, 2020.



We purchase the majority of our raw materials directly from numerous local
fabric and accessories suppliers. Some of our customers also furnish us with raw
materials so that we can manufacture their products. For our wholesale business,
purchases from our five largest suppliers represented in aggregate approximately
20.4% and 18.2% of raw material purchases for the years ended December 31, 2021
and 2020, respectively. No single supplier provided more than 10% of our raw
material purchases for the years ended December 31, 2021 and 2020. For our
retail business, purchases from our five largest suppliers represented
approximately 90.9% and 97.1% of raw material purchases for the year ended
December 31, 2021 and 2020, respectively. Five suppliers provided approximately
34.4%, 19.1%, 18.6%, 10.6% and 8.2% of our raw material purchases for the year
ended December 31, 2021. Five suppliers provided approximately 34.6%, 19.8%,
16.0%, 15.9% and 10.8% of our raw material purchases for the year ended December
31, 2020. We have not experienced difficulty in obtaining raw materials
essential to our business, and we believe we maintain good relationships with
our suppliers.



                                       35





We also purchase finished goods from contract manufacturers. For our wholesale
business, purchases from our five largest contract manufacturers represented
approximately 45.3% and 45.1% of finished goods purchases for the year ended
December 31, 2021and 2020, respectively. One contract manufacturers provided
approximately 27.0% of our finished goods purchases for the year ended December
31, 2021. Two contract manufacturers provided approximately 12.6% and 11.2% of
our finished goods purchases for the year ended December 31, 2020. For our
retail business, our five largest contract manufacturers represented
approximately 22.6% and 13.4% of finished goods purchases for the year ended
December 31, 2021 and 2020, respectively. No contract manufacturer provided more
than 10% of our retail finished goods purchases for the years ended December 31,
2021 and 2020. We have not experienced difficulty in obtaining finished products
from our contract manufacturers and we believe we maintain good relationships
with our contract manufacturers.



Selling, general and administrative expenses

Our selling expenses primarily include local transportation, unloading costs, product inspection costs, retail staff salaries, and decoration and marketing costs associated with our retail operations.



Our general and administrative expenses include administrative salaries, office
expense, certain depreciation and amortization charges, repairs and maintenance,
legal and professional fees, warehousing costs and other expenses that are not
directly attributable to our revenues.



Costs of our distribution network that are excluded from cost of sales consist
of local transportation and unloading charges, and product inspection charges.
Accordingly, our gross profit amounts may not be comparable to those of other
companies who include these amounts in costs of sales.



                                                                                                                   Increase
                                                                                                                  (Decrease)
                                                                                                                   in 2021
                                                             Year ended December 31,                               Compared
                                                    2021                                   2020                    to 2020
                                              (In thousands of U.S. dollars, except for percentages)
Gross Profit                          $       100,952             30.5 %       $       91,213           34.1 %           10.7 %
Operating Expenses:
Selling Expenses                               63,074             19.1                 55,894           20.9             12.8
General and Administrative Expenses            38,416             11.6                 31,176           11.7             23.2
Total                                         101,490             30.7                 87,070           32.6             16.6
(Loss) Income from Operations         $          (538 )           (0.2 )%  
   $        4,143            1.5 %         (113.0 )%



Selling expenses for the year ended December 31, 2021 have been $63.1 millionup 12.8% year-on-year December 31, 2020. The increase is due to higher travel expenses.



General and administrative expenses for the year ended December 31, 2021 were
$38.4 million a 23.2% increase compared with the year ended December 31, 2020.
As a percentage of total sales, general and administrative expenses accounted
for 11.6% of total sales for the year ended December 31, 2021, compared with
11.7% of total sales for the year ended December 31, 2020. The increase was
attributable to the increased salaries.



                                       36




(Loss) Operating Income



(Loss) income from operations for the year ended December 31, 2021 decreased
113.0% to ($0.5) million loss from $4.1 million income for the year ended
December 31, 2020. (Loss) income from operations accounted for (0.2%) and 1.5%
of our total sales during the year ended December 31, 2021 and 2020.



Interest Expense


Interest charges were $2.4 million and $2.3 million for the years ended the 31st of December, 2021 and 2020, respectively. There were no significant changes.


Other Income


Other income was $1.9 million and $1.9 million for the years ended December 31, 2021 and 2020, respectively. There were no significant changes.


Income Tax Expenses


Income tax expense for the year ended December 31, 2021 was $2.9million, a 19.2%
increase compared to the same period of 2020. The increased income tax expenses
are mainly due to some subsidiaries are profitable and there are higher income
tax expenses but other subsidiaries are loss.



The Company’s operating subsidiaries are governed by the PRC Income Tax Law with respect to Foreign investment companies and Foreign companies and various local income tax laws (“the Income Tax Laws”).

All PRC subsidiaries except He Meida are subject to income tax at the statutory rate of 25%.



He Meida incorporated in Xizang (Tibet) Autonomous Region is subject to income
tax at 15% statutory rate. The local government has implemented an income tax
reduction from 15% to 9% valid through December 31, 2020.



Perfect Dream has been incorporated into the British Virgin Islands (BVI), and under current BVI laws, dividends and capital gains arising from the Company’s investments in BVI are not subject to income tax.

Ever-Glory HK was incorporated in Samoaand under the laws in force Samoa has no income tax liability.



Ever-Glory Supply Chain Service Co., Limited was incorporated in Hongkong on
December 27, 2017. Under the current laws of Hongkong, its income tax rate is
8.25% when its profit is under HKD 2.0 million and its income tax rate is 16.5%
when its profit is over HKD 2.0 million.



The PRC's Enterprise Income Tax Law imposes a 10% withholding income tax for
dividends distributed by a foreign invested enterprise in PRC to its immediate
holding company outside China; such distributions were exempted under the
previous income tax law and regulations. A lower withholding tax rate will be
applied if there is a tax treaty arrangement between mainland China and the
jurisdiction of the foreign holding company. The foreign invested enterprise
became subject to the withholding tax starting from January 1, 2008. Given that
the undistributed profits of the Company's subsidiaries in China are intended to
be retained in China for business development and expansion purposes, no
withholding tax accrual has been made.



New U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs
Act (the "U.S. Tax Reform"), was signed into law on December 22, 2017. The U.S.
Tax Reform modified the U.S. Internal Revenue Code by, among other things,
reducing the statutory U.S. federal corporate income tax rate from 35% to 21%
for taxable years beginning after December 31, 2017; limiting and/or eliminating
many business deductions; migrating the U.S. to a territorial tax system with
a one-time transition tax on a mandatory deemed repatriation of previously
deferred foreign earnings of certain foreign subsidiaries; subject to certain
limitations, generally eliminating U.S. corporate income tax on dividends from
foreign subsidiaries; and providing for new taxes on certain foreign earnings.
Taxpayers may elect to pay the one-time transition tax over eight years, or in a
single lump-sum payment. The Company measured the current and deferred taxes
based on the provisions of the Tax legislation. After the Company's measurement,
no deferred tax expense (income) relating to the Tax Act changes for the year
ended December 31, 2021.



                                       37




Net income (loss) attributable to the Company



Net loss for the year ended December 31, 2021 was ($0.09) million, a decrease of
102.8% compared with net income from the same period in 2020. Our basic and
diluted earnings per share were ($0.01) and $0.22 for the years ended December
31, 2021 and 2020, respectively.



Summary of Cash Flows



Summary cash flows information for the years ended December 31, 2021 and 2020 is
as follows:



                                                                    2021                  2020
                                                                  (In thousands of U.S. dollars)
Net cash(used in) provided by operating activities             $       (17,009 )     $        40,456
Net cash used in investing activities                          $       (12,207 )     $       (10,955 )
Net cash provided by financing activities                      $         2,776       $        33,919



Net cash used in provided by operating activities was $17.0 million for the year
ended December 31, 2021, compared with net cash provided by $40.5 million during
the year ended December 31, 2020. The change was primarily due to increase in
accounts receivable and more inventories purchased this year.



Net cash used in investing activities was $12.2 million for the year ended
December 31, 2021 compared with $11.0 million during the year ended December 31,
2020. This increase was mainly due to the increase in purchase of property and
equipment and remodeling expenditure in 2021.



Net cash provided by financing activities was $2.8 million for the year ended
December 31, 2021 compared with net cash provided by $33.9 million during the
year ended December 31, 2020. The decrease was primarily because we received
less loan proceeds from and repaid more loans to the banks this year. During the
year ended December 31, 2021, we repaid $71.8 million of bank loans and received
bank loan proceeds of $73.3 million. Also, under the counter-guarantee
agreement, we received $3.8 million from and paid $0.7 million to the related
party during the year ended December 31, 2021.



Cash and capital resources

As of December 31, 2021 we had cash and cash equivalents of $56.6 million, other
current assets of $194.2 million and current liabilities of $199.8 million. We
presently finance our operations primarily from cash flows from operations and
bank loans and we anticipate that these will continue to be our primary sources
of funds to finance our short-term cash needs.



Bank Loans


From March 2020 to July 2020, Ever-Glory Apparel entered into a certificate of
three-year time deposit of $29.8million (RMB190.0 million) with the Shanghai
Pudong Development Bank with annual interest rates ranging from 3.75% to 3.99%.
From July to November 2021, Ever-Glory Apparel pledged the certificate of
three-year time deposit to the Shanghai Pudong Development Bank and Ever-Glory
Apparel had borrowed $29.8 million (RMB 190.0 million) under this line of
certificate with an annual interest rate from 2.60% to 2.90% and due between
June to November 2022.



In December 2020, Goldenway entered into a certificate of three-year time
deposit of $17.2 million (RMB110.0 million) with the Shanghai Pudong Development
Bank with an annual interest rate of 3.85%. From February to July 2021,
Goldenway pledged the certificate of three-year time deposit to the Shanghai
Pudong Development Bank and Goldenway had borrowed $9.4 million (RMB 60.0
million) under this line of certificate with an annual interest rate from 2.90%
to3.40% and due between February to June 2022.



In April 2020, Goldenway entered into a line of credit agreement with Industrial
and Commercial Bank of China, which allows the Company to borrow up to
approximately $6.3 million (RMB40.0 million). These loans are collateralized by
the Company's property and equipment. As of December 31, 2021, Goldenway had
borrowed $6.3 million (RMB40.0 million) from Industrial and Commercial Bank of
China with an annual interest rate 4.57% and due in August 2022.



In July 2019, Ever-Glory Apparel entered into a line of credit agreement for
approximately $15.7 million (RMB100.0 million) with Industrial and Commercial
Bank of China, which is collateralized by assets of Jiangsu LA GO GO ,Tianjin LA
GO GO and Jiangsu Ever-Glory , under a collateral agreement executed among
Ever-Glory Apparel, Jiangsu LA GO GO , Tianjin LA GO GO , Jiangsu Ever-Glory and
the bank. As of December 31, 2021, Ever-Glory Apparel had borrowed $15.7 million
(RMB 100.0 million) under this line of credit with annual interest rates ranging
from 3.92% to 4.35% and due between January to October 2022.



In April 2020, Goldenway entered into a line of credit agreement with Nanjing
Bank, which allows the Company to borrow up to approximately $7.1 million
(RMB45.0 million). These loans are collateralized by the Company's property
and
equipment.



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In June 2021, Goldenway entered into a margin contract with Nanjing Bank.
Goldenway had borrowed $4.7 million (RMB 30.0 million) under this contract for
$0.9 million (RMB 6.0 million) was restricted with an annual interest rate 3.36%
and due in June 2022. In September 2021, Goldenway entered into another margin
contract with Nanjing Bank. Goldenway had borrowed $3.1 million (RMB 20.0
million) under this contract for $0.6 million (RMB 4.0 million) was restricted
with an annual interest rate 3.44% and due in September 2022.



All bank loans are used to finance our daily operations. All loans were repaid on or before maturity.


Capital Commitments


We have an ongoing program to improve our manufacturing facilities and expand our retail stores. We anticipate that cash flow from operations and borrowings from banks will be used to pay these capital commitments.



Uses of Liquidity



Our cash requirements for next year will be primarily to fund day-to-day operations and the growth of our business, with some of this money being used to fund new stores.



Sources of Liquidity



Our primary sources of liquidity for our short-term cash needs are expected to
be from cash flows generated from operations, and cash equivalents currently on
hand. We believe that we will be able to borrow additional funds if necessary.



We believe our cash flows from operations together with our cash and cash
equivalents currently on hand will be sufficient to meet our needs for working
capital, capital expenditure and other commitments for the next year. No
assurance can be made that additional financing will be available to us if
required, and adequate funds may not be available on terms acceptable to us. If
funding is insufficient at any time in the future, we will develop or enhance
our products or services and expand our business through our own cash flows
from
operations.



As of December 31, 2021 we had access to approximately $38.4 million in lines of
credit, of which approximately $9.4 million was unused and available. These
credit facilities do not include any covenants. We have agreed to provide
Jiangsu Ever-Glory a counter-guarantee of not more than 70% of the maximum
aggregate lines of credit and borrowings guaranteed by Jiangsu Ever-Glory and
collateralized by the assets of Jiangsu Ever-Glory under agreements executed
between the Company, Jiangsu Ever-Glory and the banks. The maximum aggregate
lines of credit and available borrowings was approximately $9.4 million (RMB
60.0 million) and approximately $0.0 (RMB 0.0 million) was provided to Jiangsu
Ever-Glory as the counter guarantee as of December 31, 2021.



Foreign currency translation risk



Our operations are, for the most part, located in the PRC, which may give rise
to significant foreign currency risks from fluctuations and the degree of
volatility in foreign exchange rates between the United States dollar and the
Chinese RMB. Most of our sales are in dollars. During 2003 and 2004, the
exchange rate of RMB to the dollar remained constant at RMB 8.26 to the dollar.
On July 21, 2005, the Chinese government adjusted the exchange rate from RMB
8.26 to 8.09 to the dollar. From that time, the RMB continued to appreciate
against the U.S. dollar. As of December 31, 2021, the market foreign exchange
rate had increased to RMB 6.38 to one U.S. dollar. We are continuously
negotiating price adjustments with most of our customers based on the daily
market foreign exchange rates, which we believe will reduce our exposure to
exchange rate fluctuations in the future and will pass some of the increased
cost to our customers.


In addition, the financial statements of Goldenway, New-Tailun, Catch-Luck,
Haian TaiXin, Ever-Glory Apparel, Taixin, He Meida, Huirui, Shanghai LA GO GO,
Yalan, Shanghai Yiduo, Tianjin LA GO GO and Jiangsu LA GO GO (whose functional
currency is RMB) are translated into US dollars using the closing rate method.
The balance sheet items are translated into US dollars using the exchange rates
at the respective balance sheet dates. The capital and various reserves are
translated at historical exchange rates prevailing at the time of the
transactions while income and expenses items are translated at the average
exchange rate for the period. All translation adjustments are included in
accumulated other comprehensive income in the statement of equity. The foreign
currency translation income for the year ended December 31, 2021 and 2020 was
$8.2 million and $4.6 million, respectively.

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